Everyone wants to improve their finances. The average American carries several thousand dollars in credit card debt alone and is generally in bad shape, financially speaking. Many of us turn to personal finance apps to help us figure out our spending and saving patterns and hopefully turn the situation around.

"There's a palpable loathing of banks and anger of over fees, and a feeling of mistrust toward them," according to Lindsay Goldwert, creator and host of the Spent podcast. Spent is a show that explores financial issues, as well as how we feel about money, while keeping a lighthearted tone. It's less about financial advice and more about exploring why we sometimes act against our own best interest when it comes to money.

The Promise of Personal Finance Apps Apps for personal finance can be quite varied in what they do and how they do it. "There's a definite interest in apps that help people stay on budget and keep them on track," Goldwert said. One example is Mint.com, a service and app that connects to all your financial accounts, including credit cards and investment accounts, and summarizes your financial standing across all of them. Mint shows you at a glance the balance in every account you have, as well as every time you've charged a purchase to your credit cards.

"Seeing your bank balance is key," Goldwert added. Apps that shows transactions and balances, updated in real time, help eliminate "magical thinking," she said. "If you don't know how much money you have, you can swipe your debit card and pray that it goes through. Apps let you see your balance every day, which is stark reminder of what you have and what you can spend."

Jill Gonzalez, an analyst for the app and online service WalletHub, agrees that plenty of useful personal finance apps help people make a budget and stick to it, or track the rest of your finances. But beyond watching daily spending habits, they also should be proactive, she said, and quickly flag potential problems.

"These apps should be proactively texting you when something looks a little fishy," Gonzalez said. When a large transaction posts to your account or a significant change happens to your credit score, "you should be getting automated text, alerts, and emails so that these issues don't have to be top of mind for you," she said. In other words, financial apps shouldn't just help you do a better job managing your money. They should be doing some of the real work for you.

Goldwert finds that people don't like when apps are too involved in giving you financial cues. "People want to be made aware of their spending and feel in control, but younger people don't want to be chastened if they go over budget on a drink or a cab ride home," she said. "People want to feel like they have flexibility in their budget but also feel confident that they're steadily putting money aside for a rainy day fund or toward a goal, like paying off a credit card. They want to feel the joy of achieving a goal, not be penalized if they slip up."

Some apps do focus more on achieving goals and rewarding behavior than showing you red marks every time you exceed a budget you set. Qapital, for example, is an app that adds a layer of gamification to savings. It will automatically move money into a savings account for you based on a rule you set. For example, you could create a rule that says, "If I spend less than $50 per month at Seamless, then move the remainder of that budget into an interest-bearing savings account."

Other apps, such as Stash Invest, try to remove barriers to investing. Stash charges pretty low fees to make small investments quickly, an appealing way to for busy people who don't have thousands of dollars to start investing some of their money.

Are Apps Prompting Us To Spend More? When it comes to apps in general (not financial apps specifically), the average iPhone owner in the US spent $35 on them in 2015, according to a report by SensorTower. Recent numbers from Gartner show that Americans spend more on in-app payments than outright app purchases, and that includes premium subscription memberships. A typical mobile user spends on average $9.20 every three months on in-app transactions, according to the data.

While those numbers aren't atrocious, mobile apps and other technologies could be encouraging us to spend more in other ways.

"When it comes to buying things with your phone, there's a whole industry devoted to eliminating steps to make it as easy as possible to click and buy," Goldwert said. Single-click checkout options in services like Amazon and iTunes make it faster to shop so you have less time to reconsider your purchases. Recurring subscriptions for online services are notorious for sneaking up on people. Even food delivery apps make it easy to spend more while thinking less.

"If someone asks me the quickest way to slash their budget, the first thing I say is Seamless or other food delivery," said Goldwert, who also noted that she is not a financial advisor and doesn't give financial advice on her podcast. "I've found that spending $25 a few times a week is a huge budget drain. That money can easily go into a rainy day fund and add up quickly."

All those take-out orders, in-app purchases, and subscriptions often end up landing on our credit cards.

Gonzalez has been analyzing credit debt recently. "By the end of 2016 Americans will have collectively racked up about $1 trillion worth of credit card debt alone," she said. "That's about $8,500 per household, which is a scary number because in 2008, that number was $8,400, and that was deemed unsustainable.

"Consumers are spending and spending and spending," Gonzalez said, "and they aren't paying anything off, like we used to do. Q1 of 2016 was the smallest pay-down that we've seen since 2008."

The social spending app Venmo could be encouraging people to spend more, too. Venmo lets you make peer-to-peer transactions quickly and easily, similar to PayPal works. Say you have dinner with a friend who charges the bill to her credit card. You can chip in your half by sending money directly into her account using Venmo. The biggest difference between Venmo and PayPal, however, is that in Venmo you can see everyone's transactions, including the notes they put on the transfer (it is possible to hide your activity in Venmo, but it's visible by default).

"I'm fascinated with social spending apps like Venmo," Goldwert said. "I like the ease with which we can pay people, but I think it's interesting that we can see and want to share the amount of money we pay for things and for what." Goldwert and Gonzalez both agree that Venmo does prompt people to be more open about money, but that can go two ways. On the one hand, people might see their friends making responsible payments, say for bills. On the other hand, "it's another way of living our lives and our experiences out in the open, like on Instagram," Goldwert said. "We see how people are out and about having fun with money," and that could nudge us toward spending more to feel like we're keeping up socially.

Other Things to Watch For Anyone looking to use personal finance apps to get a handle on their spending needs to find the right ones and use them securely. Gonzalez believes personal finance apps should be free. If they require a credit card just to sign up, she said, they're probably not, and you're going to get hit with a charge at some point.

Additionally, never sign up for or use personal finance apps if you're not on a secure network. "Don't check your credit score in the middle of a Starbucks using free Wi-Fi," Gonzalez said. "Make sure you're at your house or place of work, because security is a huge issue." Better, if you need to use a Wi-Fi network that is not your own, be sure to use a VPN service, too, which will add a layer of protection to your connection.

Besides using personal finance apps to figure out how much money you have, how you spend it, and how you ought to be spending it, you should also be using them to keep an eye on your credit score and report.

"One of four credit reports has an error. A lot of people don't know that," Gonzalez said. The company where she works, WalletHub, specializes in keeping an eye on a consumer's credit report and flagging changes that occur to it. "Sometimes people don't know that there is an error, and they're looking at their score and can't figure out what's holding them back. Sometimes it's not something that they even did. It's just an error. Having that information and seeing when new accounts come up, or when some debts look like they haven't been paid off, even if you've paid them months or years ago—just being aware helps a lot."

Gonzalez noted that a bad credit score hurts much more than your ability to get money when you need it. It can also affect whether you get hired for a job, your car insurance premiums, and more. While the rules about who can pull your credit report and for what vary by state to state, Gonzalez's point is that a simple error on a credit report can negatively affect your life in tremendous ways. It's all the more reason to use an app that will raise a flag whenever a major change to your credit occurs.

Beyond apps, Goldwert notes that people can get help in real life, too. "I've heard excellent things about Debtors Anonymous. It's a very safe space where people can talk about their troubles with money with people who understand. If you're in debt and feeling shame or isolation over it, a meeting can be a great place to start. No one should feel shame about having gotten into debt. There's a way to reverse course but it takes a lot of honesty about our feelings to do it. How we were raised, what we want out of life, our disappointments—those are the things that drive many of us to spend beyond our means."

Jill Duffy is a contributing editor, specializing in productivity apps and software, as well as technologies for health and fitness. She writes the weekly Get Organized column, with tips on how to lead a better digital life. Her first book, Get Organized: How to Clean Up Your Messy Digital Life is available for Kindle, iPad, and other digital formats. She is also the creator and author of ProductivityReport.org.
Before joining PCMag.com, she was senior editor at the Association for Computing Machinery, a non-profit membership organization for...
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